Tuesday, April 14, 2015

Rand Paul's Enhanced Level of Dishonesty About Government Debt

by Neil H. Buchanan

Last week, after Kentucky Senator Rand Paul announced his doomed candidacy for the 2016 Republican presidential nomination, I received an inquiry from a reporter for PolitiFact. Longtime readers of Dorf on Law might recall that I have had my, shall we say, issues with PolitiFact (here) and similar organizations (here). Even so, I could not resist responding to the latest inquiry from a reporter who wanted to know whether there was any way to slice and dice the data to make sense of Paul's claim that the national debt is "tripling under Obama."

The reporter added: "I've ran the numbers, and that's just not true -- it's about doubled looking at public debt, and increased about 70 percent looking at the total debt. My question for you is about context: Regardless of the truth of Paul's statement, is it fair to attack a president based on debt increases in terms of the raw dollar amount? (I'm thinking about things like inflation, or the fact that many factors contribute to debt not just the current president's policies.)" Impressed by the reporter's skepticism (and pleased to see that her level of knowledge was certainly more than rudimentary), I responded.

Here, I will first reproduce the substance of my response to the reporter's inquiry. Then, I will discuss the piece that she ultimately published (which, despite generously rating Paul's statement "Half True," was nonetheless very well done). As I will describe, Paul's actual claim is even more dishonest than it originally appeared to be, and the defense that his team offered to the PolitiFact reporter represents a new level of dishonesty -- in a discourse that was already plumbing the depths of dishonesty.

My longish response read, in pertinent part, as follows:

"You're certainly right that Mr. Paul is completely wrong
in his claim, no matter how one views the matter. What's amazing is
that he couldn't even be bothered to get the basic numbers right, since
(as you surmise) it's so easy to tell a distorted story even without
simply making up numbers!

"Just to verify the basics, Obama was inaugurated on January 20, 2009. According to treasurydirect.gov's 'debt to the penny' calculator, gross federal debt ('public debt
outstanding') on that date was $10,626,877,048,913.08, and net federal
debt ('debt held by the public') was $6,307,310,739,681.66. As of
yesterday, April 7, 2015, gross federal debt was $18,152,071,523,374.83,
and net federal debt was $13,102,684,021,908.58.

"So, gross
federal debt is now 1.708 times its level on 1/20/2009, and net federal
debt is 2.077 times higher. This is consistent with the numbers that
you included in your email. So, under even the most generous version of
these facts, the debt has slightly more than doubled in the past 6-plus
years. (Of course, people like Paul generally prefer to cite the gross
number, because
it's higher, but one can hardly expect him to be intellectually
consistent.)

"Now, when Paul says that debt is 'tripling
under Obama,' I can imagine that he might say that he's relying on the
predicted level of debt when Obama will leave office in 2017. For
future numbers, we can't use the 'debt to the penny' site (because it provides no forecasts), so instead I looked at this table from the Tax Policy Center, which gives debt at the end of each fiscal year, including forecasts for the next few years.

"Obama
took office three months into the 2009 fiscal year, but let's lay the entire
increase in the debt in 2009 on Obama. (Because of the recession, 2009
had the biggest nominal deficit ever.) This shows gross federal debt
going from $9.986 trillion at the end of fiscal 2008 to $19.333 trillion eight years later, and net federal debt going from $5.803 trillion in fiscal 2008 to $14.108 trillion eight years later. Again,
the larger proportional increase is with the net debt, but even that is
only 2.431 times higher. Even the most forgiving standard does not get
you anywhere close to 'tripling under Obama.'

"Sorry
that it's taken me so long to get to your real question, but it seemed
important to rule out all of the possible ways in which the statement
might be literally true. In any case, you asked if it's 'fair to attack
a president based on debt increases in terms of the
raw dollar amount? (I'm thinking about things like inflation, or the
fact that many factors contribute to debt not just the current
president's policies.)' The answer is no, it is not at all fair. Let
me offer a few reasons why not.

"First, any honest
economist would look at the ratio of debt to GDP to compare debt 'burdens' at different points in time, or for different countries. This
is simply because a larger economy can support a larger nominal amount
of debt, just as a wealthier borrower can support a larger amount of
borrowing. (That's why, for example, mortgage lenders evaluate
borrowers on the basis of the borrowers' debt as a percentage of their
incomes. A person with annual income of $500,000 is able to handle more
debt than a borrower with an annual income of $50,000.) This measure,
by the way, takes into account your (quite correct) comment that
inflation can distort debt numbers, because both the numerator and the
denominator of the debt-to-GDP ratio are inflating at the same rate.

"Happily,
that Tax Policy Center table to which I linked above also provides
debt-to-GDP computations. For gross debt, the debt-to-GDP ratio rises
from 67.7% to 102.7% from 2008 to 2016, a multiple of 1.517. For net
debt, the increase is from 39.3% to 75.0%, or a multiple of 1.908. By
comparison, note that, when Reagan left office, net and gross
debt-to-GDP were both more than 1.5 times higher than they had been when
he took office.

"Second, as you surmise, there are a
lot of things other than a president's policies that change the debt
level. As I noted above, the gross debt increase in 2009 was huge,
because of the decreased tax revenues and increased benefit payments
caused by the Great Recession. In fact, both gross and net debt rose by
more than $3 trillion total from the end of 2008 to the end of 2010,
the two years that bracket the official recession. The 'stimulus,' by
the way, was only $800 billion spread over two years, and some of that
had a positive effect on GDP, so as a percent of GDP, the stimulus was a
very minor part of this story. More generally, to blame Obama for debt
increases during his first term is to blame him for an economic crisis
that began before he took office.

"Third, the actual
policies that Obama agreed to and signed have reduced deficits. (I
should emphasize that this was actually very bad policy, because the
consensus view of economists is that deficit reduction should not have
been taking place when the economy was weak. But unless Paul wants to admit that deficit spending can be necessary and helpful, he's
certainly not in a position to fault Obama for being too much of a
deficit hawk.) Obama agreed to immediate budget cuts in the 2011 deal
that avoided a debt ceiling-related default. He also agreed to the 'super-committee' structure that ended up failing and thus bringing on
the 'sequester' cuts. Again, much of this was hugely damaging to the
economy and to the people who were affected by the cuts, but there's no
doubt that Obama agreed to policies that resulted in less debt than
otherwise would have been incurred."

I certainly did not expect all of my points above to find their way into the PolitiFact piece, given the understandable limitations of that forum. Happily, however, what the reporter wrote did include most of the major points that I made, citing as her sources Linda Bilmes at Harvard and me. I might quibble with a few things, especially the focus on gross debt rather than the much more meaningful net debt numbers -- and I guess I wish that she had chosen to include the comparison to Reagan's record (but see below) -- but it was a very good piece.

What I found astonishing, however, was the response that the Paul campaign provided to the reporter, defending his statement. It turns out that he is not claiming that the debt tripled (or will have tripled) under Obama at all. No, his statement was that "[b]ig government and debt doubled under a Republican administration. And it’s now tripling under Barack Obama’s watch."

If that still sounds like Paul is claiming that debt will be three times higher when Obama leaves office then when he took office (the more generous version of his claim, which I debunked in my email to the reporter), you have not truly taken on board Paul's capacity for dishonesty. As the article explains: "Looking at the whole statement -- not just the second clause -- Paul
wasn’t saying the debt has tripled under Obama alone. Instead, he was
saying that it doubled under President George W. Bush. And since Obama
took office, it has risen to a point that is triple what it was when
Bush first took office." (Interestingly, Paul missed an opportunity here, because if we use net debt, the increase is from approximately $3.3 trillion to $13.1 over the same time period, almost four times higher.)

The reporter's understated description of this deception is beautiful: "This statement is confusing. ... From one not-so-obvious angle, Paul's numbers are correct. But because
the statement could so easily be interpreted in another, less
accurate way, we rate it Half True." Indeed. Especially given that Republicans love to make such hay out of, say, Bill Clinton's "parsing of words" ("It depends on what your definition of is is!"), this is truly a new low.

But there is a broader way in which Paul wins by losing here. After quoting me as saying that the debt-to-GDP ratio is the better way to measure debt levels, the PolitiFact reporter wrote that this ratio "shot up to 103.2 percent" in 2014. Even if she had used the net debt, the number would be 74.1%, which is about 1.5 times its level when Obama took office, so a person who is so inclined could describe that as "shooting up" as well.

One can already hear the anti-debt hyperventilators saying, "Oh, so the debt hasn't tripled. It has ONLY gone up to more than 100% (or 74%) of GDP? I guess there's no problem, then!!" As long as people are arguing about just how high debt has climbed, Paul and the rest of his party are winning the discussion. And if one points out that their own budget plans would, if adopted, result in increases in the dollar levels of debt, then one is indirectly suggesting that they are not being harsh enough in trying to privatize Medicare, starve Medicaid, cut Social Security, and slash spending on vulnerable people.

Calling them hypocrites, in other words, merely reinforces the idea that the principle that they are betraying -- budgetary orthodoxy -- is a good thing and should not be betrayed. This is exactly the trap that Democrats fell into during the Reagan years, chastising him for being the truly irresponsible budgeter. In my email to the PolitiFact reporter, I tried to bash Reagan in that way, but I tried to do so in the "even if you take Republicans' arguments on their own terms" mode. Even that is dangerous, however, because it still reinforces the overall narrative. Indeed, my entire email could be criticized for just that reason. (But what is the alternative? Not calling out such blatant deceptions?)

Finally, Paul will surely receive credit from those pundits who are looking for "honestly bipartisan" thinking. He blamed both parties for this supposedly horrible, horrible debt. Yes, he was utterly dishonest about it, but surely these reporters will selectively decide which lies are "just a part of politics, and what can you do?" In the end, it will merely increase the pressure for regressive policies, which is exactly what the Republicans (and certainly Rand Paul) are aiming to achieve.

Bit of an aside, but I'm surprised by your comments about gross debt versus net debt. Most of the difference between the gross debt and the net debt is the social security trust fund, right? I agree that, to the extent that one believes that the trust fund is an accounting fiction (as Rand Paul almost certainly does), then one should find the net debt to be much more meaningful, and invoking the gross debt is pure opportunism. But the charge goes both ways. If one believes that the trust fund is a real pre-political obligation--which is what I understand to be your position--then the gross debt is the better representation of that obligation.